Square's High-Profile Deal With Starbucks Lost It $US25 Million Last Year

It had three parts: Square would process the payments for all of Starbucks’ credit and debit card purchases, Starbucks would invest $US25 million in the company, and Starbucks founder Howard Schultz would join the Square’s board of directors.

The deal was widely seen as a victory for Square. It was impressive that a big brand like Starbucks was giving the young startup such a vote of confidence. It also drastically increased the number of places where customers could use Square Wallet, its mobile payments app, to pay.

Today, that once-heralded deal looks like a major flop, for Square at least. Starbucks saves lots of money on payment-processing fees by making the switch, but Square suffered a $US25 million loss last year because of the agreement, according to a Fortune report on Square financials.

It didn’t drum up additional business for Square at other big stores. It didn’t boost adoption of Square Wallet, either. The company just announced the decision to completely kill the app earlier this week.

Schultz stayed on Square’s board three months longer than the year he was obligated to after the agreement, but the fact that he decided not to remain in his position any longer despite how embedded Square technology is with his company came off as a bad sign.

Although Square board member Roelof Botha said that some good came out of the deal — it did boost Square’s brand — he told Fortune reporter Miguel Helft that “it’s dangerous to look at things with the benefit of hindsight.”